Episode 26: How to partner with big box retailers: Is it a good idea?

When it comes to partnering with big box retailers, there are many myths small business owners should be aware of. How exactly do you go about setting up a partnership? What do big box retailers expect from small businesses? Is it worthwhile?

In this episode of Xero Gravity, Gene and Elizabeth chat with Laura Curtis, founder of Malvi Marshmallow Confections, and Howard Saunders, retail futurist with 22nd and 5th Limited, about making these partnerships work.

Laura shares insights from partnerships such as Dean & DeLuca and Anthropologie, while Howard shares nuggets from his 25 years in retail.

“Big Retailers aren’t going to make a fortune out of you. You will make a profit, but the reason they need small business is to make them look locally connected.” And there’s much more where that came from. Ear we go!

Episode transcript

Hosts: Gene Marks [GM] & Elizabeth Ü [EÜ]

Guests: Laura Curtis [LB] and Howard Saunders [CB]

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XG Opening You’ve just tuned into Xero Gravity: a podcast for small business leaders and entrepreneurs across America. Now to your hosts, Gene Marks and Elizabeth Ü.

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EÜ Hello and welcome back to the Xero Gravity podcast. I’m Elizabeth Ü. With me again today is my intrepid co-host Gene Marks.

GM Intrepid?

EÜ Well, you are.

GM [Laughs] Yeah, well that’s the first time I’ve ever been called that.

EÜ So today we’re going to be talking about partnering with big box retailers. I know there’s many myths about partnering with big box retailers, so as a small business what are the things that you need to know?

GM I get this question from my clients all the time and readers as well, people I speak to. I mean there are, yeah, you’re a little manufacturer, you’ve designed a good product, you want to sell it at that big retailer, you know, like Walmart or Target or whatever. How do you get in there, and who do you talk to, how do you get found?

EÜ Do you want to be your own retailer, or do you want to be using these other retailers to sell your product for you? Of course it’s not always either, or there can often be a mixture of both, but it is one of the big decisions that you’ll face as a small business owner.

GM But then everybody I know is scared of the big guy, because you know, you’re going to give up information or are they going to steal your idea. Are you not going to make any money or are there going to be a team of lawyers descending on your office...

EÜ Right.

GM …negotiating some contract that’s unfavourable to you, right?

EÜ Right, and what are those hidden costs that you might not even see? What are those strange contract terms that you might not understand, or be thinking about at the time you sign the paperwork?

GM I’m really looking forward to our guests coming on the show. I think they’ll be able to shine a lot of light on these issues.

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EÜ So our two guests for today’s show are Laura Curtis, founder of Malvi Marshmallow Confections, who’s got a long history in the food world, and Howard Saunders, a retail futurist with 22nd and 5th Limited. And he’s talking today from 2015. But we’ll what he see what he has to say.

GM [Laughs] I just want to find out if there’s a cure in the future for baldness. That’s my only question.

EÜ So Laura, maybe you can start us off with a little bit about your company, and some of the retailers that you’re currently working with?

LC Sure, yeah. Thank you. My company is Malvi Marshmallow Confections as you said. We make all-natural marshmallow cookie sandwiches and other marshmallow products, and currently we’re partnering with Dean & DeLuca’s for this holiday. We also were working with Anthropologie last holiday season and then we partnered with Whole Foods in the southeast, and Lolly & Pops, which is a national candy store chain, plus a couple other big players.

EÜ That’s great! So as far as working with some of these big box retailers, was that always part of your plan and the vision for Malvi Marshmallow Confections?

LC In a way, yes. I knew that we weren’t going a traditional route, you know. My background has been mostly in restaurants. But I moved into research and development with food, and worked kind of on the other end of the table from where I am now, sourcing new vendors, finding people to put us on their shelves at the supermarkets.

EÜ And so I’m sure that that experience really helped you, when it came time to develop relationships with the big box retailers.

LC Yeah, absolutely. I definitely know what it’s like to see the field of options and to know what helps a product stand out.

EÜ What was it that appealed to you about working with retailers rather than going the customer service route, or the direct to consumer route?

LC Mm hum. Oh I think it’s just a straightforward transaction. It’s something that you know, you sit down and you deal with the nitty gritty at the front end. And then from there, once you have your system set-up, it’s pretty smooth sailing. And of course that includes invoicing, and just how to manage orders and production. But I like developing those systems and getting them in place, and then kind of creating a routine around that.

EÜ And did you see any risks that you were concerned about when it came to depending on just a few major customers, as opposed to a whole sea of retail customers?

LC Definitely, especially when you start getting those first couple of stores. That becomes 90 percent of your business when you’re starting up, so you definitely have to make sure you’re taking care of it.

EÜ Okay. So Howard, as retail futurist, can you tell us a little bit more about what that means exactly, and about your experience with retailers?

HS Sure. My experience in retail is that I’ve been in retail design in one form or another for 25 years. I worked big agencies in London, I worked at Fitch & Company back in the 80s; it was all the mad men days back then, and I designed and launched retail brands — largely in the UK and Europe for 25 years. I now travel internationally and talk at big conferences about the future of retail and where it’s going. It’s an incredible time for retail now, as you know, because you can get everything online, so why do we need stores in the first place? So, my job is to try and make sense of all that, unravel that and to help my clients prepare for the future.

EÜ And so when you’re working with small businesses that are looking to get their products in with various retailers, do you have any tips for them as far as finding the right fit, and finding the right retailer for their products?

HS Well, I do but I just think that the climate’s changed. I talk about the global financial crisis. Pre that time it was very tricky, big companies, hard to get in there with them, and I don’t know if Laura could sort of back me up on this. But I would say that now, in this sort of post-crash environment, we want different things from our products. We want products with values, not just value. We’re looking for real stuff and authenticity and all of that. And therefore retailers now are much more open minded to it. The big department stores, the big out of town, edge of town supermarkets and hypermarkets are much more likely — I would say — to be listening to small batch producers, up and coming brands, people who have stories. I would say it’s a good time for them.

GM That’s great. And you know, Howard, you bring up a really good point, and Laura, I’ve got to follow up on what Howard is saying. He’s saying it’s a good time, your big box retailers are looking at smaller partners. I mean have you found that to be your experience as well?

LC Yeah, I can absolutely back Howard up on that. And you know, when Anthropology contacted us, we were a baby business and we were really small scale. I’m pretty sure they found us through social media because I hadn’t even thought, I wouldn’t have dreamed to contact them and pitch Malvi to them. So they really reached out to us and I’m sure they’ve got a team of people just scouting — like you said: businesses with stories and with background.

GM A lot of times people are reaching out to the retailers themselves. But for starters, did you find that because they found you on social media, that it puts you in a better position to negotiate with them?

LC I wouldn’t say that. It was such a shock to get the call that I would have…

GM Me? Little old me!

LC …practically given them away, and it did a lot for us you know, to be on their shelves. I do think we sold them at a lower price point than we should have. Going back I probably would have been firmer on that. So, yeah, that was a lesson learned for sure.

EÜ And so how did you go about, or at least when you’re negotiating terms with other retailers, how do you go about looking at the pricing? I mean obviously you’re selling a much larger volume, but are there any hidden costs that you didn’t take into account?

LC Definitely, definitely, we’ve costed out our product, we have a better idea of what our labor costs are now. So we’re really firm at this point, and will even turn down deals right now. Thankfully we have the luxury to turn down deals if they ask for procedures that take us out of those systems that I mentioned before. Like different packing lists or including, you know, different kind of forms within the packaging. We just realized that it gunks us up — we’ll miss things and then have to go back and correct them, and that’s time lost from other focuses.

GM Got it. Hey, so Howard, I mean, you’ve been through this a bunch of times. What do you think are some of the myths about trying to sell into these big box retailers? What do you hear from smaller businesses that you kind of shake your head and say, no that’s just – that’s just not true?

HS It’s tricky. I think the biggest myth is what I’ve already said, which is that they need you more than you need them. Now that’s tricky because some of them don’t know that. I mean, obviously the Urban Outfits and the Anthropologies — same company I know – they’re smart aren’t they? They’re going to know what they want, where they’re going. They’re going to look for those quirky brands, something that brings kudos to them. Some of the other big companies — they don’t know that yet.

HS So it’s convincing them of what they should know, which is always slightly tricky. The other thing I guess is that small producers always think they’re going to get ripped off. They can and they can be. The truth is though that – that those big companies are not really there, they’re not going to make an awful lot of money out of you. You know it depends if you’re making, you know, if you’re making small batched jam or – or handmade knives or whatever the product is, they’re not going to make a fortune out of you at all.

You’re going to make a profit, but they’re not. They need you as the bait. They need you so they look locally connected, investing in all the right things, so they look more artisan and they get all that kudos from having that small producer in store. So, you know, seeing the relationship in the right balance is very important.

LC Yeah, that’s really interesting.

EÜ So that is…

LC Sorry to jump in, but that was really interesting to hear and I can see that’s true. I think that we were in some ways also a bit of a headache for Anthropology to deal with then, since we didn’t have that kind of scale set up yet and…

HS Yes, exactly. I meant the scale is the thing, because suddenly you need this huge factory, and getting the logistics together and all that. I mean it’s tricky, but what they want from you really is the kudos of being small and cute and artisan, and so they don’t really want to be buying into a business that sort of knows where it’s going. They kind of want to lead you a little bit.

GM You know, that’s a fascinating thought. I never really thought of it that way. That as a small business you’re actually helping these larger resellers.

HS Yes.

GM With retailers be marketers, right?

HS Yes, small producers think they have to look big and sophisticated
and already out there, already corporate sort of thing, and actually
that’s not what they want at all.

EÜ Right, well I’m wondering, I mean given all of this, are there any particular things, Howard, that you would recommend, or even Laura, that you would recommend that small manufacturers or small businesses include in their contracts with retailers? To make sure that not only are they getting what they need out of the agreement but that there may also be things that small businesses can do to make the agreement work out better for both parties?.

HS Well, okay, well I would say there’s lots to learn. I mean in the contract, let’s, we can get specific. The first thing you have to do, you have to understand that we don’t need your stuff. Nobody needs another pot of jam or another knife or another tin of olives or marshmallows, whatever it is, we don’t need any of it. Okay? What they want is your story.

So when you build that brand, you have to build the story, you have to know exactly who you are, how you want to be presented, how you want to be perceived, how you tell the story in store. What your point of sale is going to look like. You have to have a view of who you are, the tone of voice, and in practical terms, you have to need to know where you’re going to be in store. Who’s going to be next to you so you can start to build a little co-tenancy, knowing who those tenants are next to you, whether it’s shelf space or whether it’s actually a concession in store. It’s very important to know how you’re going to sit in store. So there’s lots of stuff that should go into the contract about understanding your brand and protecting that.

EÜ And I know that some large big box retailers I once worked for, that were part of Walmart’s supply chain: we had all kinds of data about what was actually in the shopping cart at the same time as our products…

HS Interesting.

EÜ So as far as knowing who’s next to you on the shelf. I mean we even knew what was going home with our products in…

HS Yes, exactly.

EÜ …that shopping cart. So I mean…

HS Exactly.

EÜ …is it true, and Laura has this been your experience? Have the retailers that you’ve worked with given you a lot of data to work with in terms of helping them understand how much of your product you might sell, or with what partner products?

LC Not much honestly. As far as we know where we’re going in the store. We’ve seen marshmallows experiencing a bit of a boom right now. And we’ve seen our products partnered with other marshmallow competitors, side by side. But no, I haven’t unfortunately seen much data on how the actual shopping experience is going, and what people are grabbing alongside Malvis.

HS Yeah.

LC I would love to know that.

HS We talked about the co-tenancy and what your retailers are obviously doing Laura, is putting you alongside similar products and that’s not a bad thing. That gives you a critical mass.

LC Mm’hm.

HS So it’s not about finding that space in the store that’s unique to you, it’s just about creating the right juxtaposition that is going to work for your product.

GM Laura, did you have any trust issues? You know what I mean? Were you afraid that these guys were going to take any of your intellectual property, or any of the designs that you have, or ideas that you had, and just use it for themselves and not include you? Was that a concern of yours at all?

LC Oh, it’s generally a concern of mine. I’m just waiting for someone to come up with their version of a Malv,i but in working with these partners, no, not at all. I know they have their plates full and that their focus is really somewhere else. So, and honestly, working with them and setting up these deals has been very easy and very – almost informal. It seemed like at times I don’t believe that it’s been as easy as it has been or I can’t believe that, you know, it’s just like talking with any other smaller retailer and setting up. It’s just a few more forms to fill out.

EÜ If you have any advice for small businesses that are looking to partner with retailers for the first time, what would you suggest as a few first steps?

LC Okay, so I told you the Anthropology story. We were really passive in that transaction, which was great, but also guess an online version of hitting the pavement. You know, going into LinkedIn you can find a lot of information just by targeting a company. And then, just clicking on links of contacts in their contacts for their connections, you can just go down a chain and pretty much find who you need to, and then fiddle around with different email formats. [laughs] So yeah, that’s worked out a couple of times. Also serendipity has played a big part.

You know, my family has a restaurant right next to where we produce Malvis, and I had been trying to reach out to Whole Foods for a long time. And then one day — and we don’t usually display Malvis at the restaurant — but one day we had them there, and a woman who is a frequent customer came in and asked the twins, “What are these? Where did these come from?” The twins are my sisters in law who run the restaurant, and they told her our story and she happened to be the regional marketing director for Whole Foods.

EÜ Oh perfect!

LC She directed us to the VP of sales and within a week we were set up,
and then actually hitting the pavement. When I’m in town in New York I will look up our local supermarket presence, and walk in their office.

And maybe I’ll take samples or try to email someone, and tell them
I’m coming. Sometimes it’s really just opening the doors and showing and showing them some samples, and asking if I could talk to someone.

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GM So now it’s time for a segment we call ‘What I Wish I Knew’. This is where our guests share with us one key piece of advice they wish they had when starting out in their business.

EÜ So Laura, if you had one piece of advice that you wish you knew early on into your career, as far as getting into retailers or working with retailers, what would that be?

LC Well, I wish I’d known what Howard was saying earlier, that you do have some say in how your story is presented, and that of course is your most valuable asset. To retailers who are much bigger there is value in what you’re offering besides just financial, and that you can push to get your story told in the way you want to. I’m going to have to try that out in the future.

HS I wish I knew I was going to get old so quick.

GM [laughs]

HS And what I mean by that, as I speak to a lot people — and it’s just me you know, time moves on and I speak to people of, “Yeah, we’re thinking of starting this brand. We’ve got this café thing going and we’re going to set this thing up and I’ve got this practically….” Five years later, they say “Well, yeah we’re not ready. I’ve got a friend who’s going to do…” You need to get moving.

GM Right.

HS This is the thing: the years go by very quick and things start to drain their momentum. So harness momentum. Move quickly, get your story right and get out there.

GM I love that. I love that.

EÜ And now on to ‘The Elevator Pitch.’ This is a short segment where we encourage innovation and entrepreneurship, and have our guests, Howard Saunders and Laura Curtis, compete in delivering an elevator pitch. On each show we have a different random product or service, and the person with the best pitch will take home a $100 Amazon gift card.

HS Whoo!

GM [Laughs]

EÜ All right. So 2015 marks the 30th anniversary of the film Back to the Future, and so in the spirit of this classic film and in light of recent news that Hover Boards are illegal in New York City, we’re going to ask you to make a business pitch to a big retailer in a bid to sell Hover Boards to the masses. So here are our game rules: One is that you must identify the problem. Two is that your pitch must offer a solution. Three, you must identify your target market. Four and your product or service must have a compelling and marketable name. And five, your pitch must be creative and outside the box.

GM You get 90 seconds to respond. Howard, you first. Are you ready? Go!

HS I am aiming my product, my target market is people, like my age, in their 50s right up to Octogenarians. People who don’t move too quick. People that need to move a little faster. So my strap line is “Let’s get this city moving” because I’m launching today, for you guys, the Silver Surfer Hover Board. This is aimed at oldies. This is aimed at me, guys – this is – we’ve got to move faster, we’ve got to get things done. And think about the benefits: no road tax, no waiting for buses. This is going to help you keep fit, keep you agile. It’s cheaper than going to the gym and cheaper than a personal trainer. You can use it home. Do you think the world is passing you by? Let’s solve that problem guys. If you don’t buy this — what you don’t know is — I also have a time machine.

EÜ [laughs]

HS And I have been to the future, and you already sell this product and it’s a big hit, so if you don’t t buy this product, you’re fiddling with the future, and that’s kind of dangerous.

GM That was awesome. That was awesome. All right, it’s a tough one to beat, you’ve got 90 seconds…

LC Okay.

GM …go ahead!

LC Great well, I love that. I would love to see my mum and dad on a Silver Surfer. But mine – my product is focused more on those Brooklyn hipsters, the Millennials, and I see the problem with these hover boards not being allowed in New York is an issue of the motor vehicle registration. So I have created an app: it’s called the Wiz Way. Wiz Khalifa’s our spokesperson, and in the app you get to register your hoverboard, and we’ll coordinate with the local department of vehicle whatevers, and we have a Justin Bieber video showing you all the safety maneuvers and traffic procedures, and how to use your hoverboard around the city. So, yes, Wiz Way all the way!

HS Woo hoo.

GM Love it! That sounds great. My turn, so I’ve got 90 seconds to go…

HS Come on – come on.

GM So we have the problem with the hoverboard going around, and then we have a problem like people like me who have four thumbs and all knuckles that are complete klutzes. So I’m going to offer a hover- board solution to people who are just not able to stand up straight on a hoverboard at all. And what I’m going to do is I’m going to partner with a local hospital or a doctor’s office, and I’m going to call it…

EÜ Oh no!

GM Hover you’re covered! And it will be a hoverboard…

HS [laughs]

GM …that will come complete with medical services for when you inevitably fall off your hoverboard and break your hip or your leg, and that’s what the deal is going to be…

HS Well there is that, there is that…

GM Yeah, there it is. All right that’s great. So Elizabeth what do you think?

EÜ Wow, wow, so I’m going to say that Gene not only are you disqualified for being one of the co-hosts of the show, but I think that your business model incentivises the manufacturer to release faulty products. So I’m going to disqualify you on those grounds. And I have to say that the Silver Surfer is an excellent name. I like the Silver Surfer name better than Wiz Way, but they both have really good alliteration, so when you’re looking for a good name, that’s key.

HS We worked hard on this, guys.

EÜ As far as target audience I would have to say that for people in their 50s and 80s, I’m guessing there’s a lot fewer of them that are actually interested in the cool cache that a hoverboard would introduce. Whereas the Brooklyn Millennial Hipster market, I mean if you’re targeting them you’re basically targeting the rest of people in that age group around the country, since they are the ones who are setting those trends. So Laura gets the point there as far as the target audience. I wasn’t quite sure how Howard was going to sell these Silver Surfers to his Octogenarians.

HS [Laughs].

EÜ So no mention of that. But Laura also had some celebrities listed here in her go-to market strategy.So I think I’m going to give Laura the win on this one!

HS Whoo!

LC Yeah, thank you.

GM I agree with you Elizabeth. I think it’s a really good idea actually.

LC Oh thank you.

GM So good job, good job.

LC Thank you very much.

GM You’re in the wrong field.

EÜ So Laura will be taking away the $100 Amazon gift card. This is our guest, Laura Curtis, from Malvi Marshmallow Confections.

HS Well done Laura.

LC Thank you.

GM I really appreciated you guys joining us today, we learned a lot. Approaching big box retailers is not an easy thing to do, and I think you guys gave us some great advice, as well as some thoughts about things that you’ve learned over the years as well. So thank you.

HS I’m just going to get on my hoverboard and go now.

EÜ Back to the future!

HS Exactly!

GM Thanks very much guys, and we’ll talk to you soon.

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Okay, listeners, have you got a more innovative pitch for a hoverboard? We’d love to hear it. Take a video of yourself delivering a 90-second pitch and post it to Twitter. Use the hashtag #xerogravity for a chance to win a $100 Amazon voucher of your own.

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EÜ Howard cracks me up.

GM Elizabeth, what were some of the things you took away?

EÜ Well I really loved how both Howard and Laura were talking about the power of telling your own story. And especially hearing Laura talk about how she wished she had known that she had more power over how her story was told. And then Howard saying, that in fact, it’s the story that the retailers want, more so than your actually stuff. That your product can really help you position you to have a…

GM Yeah I…

EÜ …great contract and relationship with your retailers.

GM Sometimes we don’t realize that, you know, retailers, they want us
as much as we want them.

There really is a win-win thing. Look online — there was a great article written by a friend of mine, Colleen Debase. It’s a few years old. It’s Entrepreneur.com and it’s called “How the little guy can partner with big companies.” It’s still extremely relevant, and I think it’s a really good article. So if you’re looking for more information and some tips on trying to market and partner with big companies, take a look at that article. The link to it will be in the show notes.

EÜ Thanks for joining us. Hope you enjoyed this episode of Xero Gravity.

GM Hope you learned a lot, I know I did.

EÜ Make sure you join us next week. I’m Elizabeth Ü.

GM And I’m Gene Marks, and Elizabeth we have a whole week not talking to each other. I can’t wait to talk to you again.